Over the past few years, Alipay, WeChat, and other mobile financial and non-financial platforms have become ubiquitous in China. This ubiquity has led to a fiercely competitive market, so increasingly these companies have begun to look overseas, expanding into foreign markets including Japan, Korea, and Southeast Asia. Although they are tremendously successful domestically, China's large tech players face multiple challenges when expanding abroad including regulation, which has become a real challenge for Tencent in Thailand as of late. 

On May 27th, the People’s Bank of China (PBoC) released the implementation details that will govern foreign investment in China’s interbank bond market. The new rules make it much easier for certain foreign investors to participate in Chinese bond market activities, such as borrowing/lending, futures/forwards, and swaps, including interest rate agreements. 

The PBOC-backed 'Payments Clearing Association of China' published its annual report in May. We talked about some of the digital payments statistics from the report in our previous commentary, but the report also features ranking for China acquiring market, which is even more significant because such data has never been officially published before.

On May 6th, the People’s Bank of China (PBOC) changed its policy for investors in the interbank bond market. These modified regulations will open up the market to new types of investors including asset managers, housing provident funds, pension funds and charities.

Friday, May 20th was the first day when foreign commercial banks were allowed to trade yuan on the recently opened inter-bank forex market. The first batch of the banks will be able to trade both spot RMB and derivatives.

Last week in China, the China Securities Regulatory Commission (CSRC) prohibited listed companies from raising capital earmarked for investment in the following four industries: Internet Finance, Video Games, Film and TV, and Virtual Reality. The new prohibition is an attempt to steer money into the real economy, which is defined as industries producing tangible products and services. Permissions for mergers, acquisitions, and refinancing in those ‘unreal industries’ have been halted, as well.

The Annual Payments Report by the Payment and Clearing Association of China was published on May 19th and showed the continuing growth in payment transactions in China. The total amount of online payments reached RMB 2,042 trillion, spread between commercial banks and payment service providers (PSPs).

Although China’s newly issued April export/import data may be worrying on its face, when examined from a different angle, it may tell a more positive story.

The long expected payment system of smartphone producer Xiaomi has finally entered the market. By cooperating with China’s dominant card-payment processor China UnionPay, users can now make purchases by using their phone and Xiaomi Pay through China UnionPays’ Quickpass system. The company’s latest offering comes as the third-party mobile payment market continues to grow tremendously. According to research firm Analysys Mason, the market valuation was set at 16 trillion yuan in 2015. This has attracted not only Chinese companies such as Huawei and Xiaomi, but foreign companies, as well.

In China this year, over 3,700 billion RMB (about 570 billion USD) worth of domestic debt will expire, a record-breaking amount. Many companies will face difficulty in rolling the debt over because of the limited size of the whole bond market. Even if just a small percentage of the whole market defaults, the amount defaulting would still be so large, it could start a crushing storm for an already vulnerable Chinese economy. Many defaulting state-owned companies are from sectors in difficulty as China slows, such as mining and heavy industry. This makes the possibility of default more likely to happen. And in the environment of a slowing debt market, things will probably get worse.